India - Third Chennai Urban Water Supply and Sanitation Project

Report No. PID6833 Project Name India-Third Chennai Urban Water Supply... and Sanitation Project Region South Asia Sector Water Supply and Sanitation Project ID INPE42744 Borrower Government of India Beneficiary Government of Tamil Nadu Implementing Agency Chennai Metropolitan Water Supply and Sewerage Board (MetroWater) Mr. C.P. Singh Managing Director Tel: 91-44-853 5998 Fax: 91-44-853 1243 Chennai Municipal Corporation (CMC) Mr. Jothi Jagarajan Commissioner Tel: 91-44-583 783 Fax: 91-44-583 962 Date PID Prepared June 25, 1998 Projected Appraisal December, 1998 Projected Board Date May, 1999 Background 1. Country and Sector Background Urban water supply and sanitation (WS&S) sector issues in India Inadequate supply and quality of WS&S services: although 85t of India's urban population has access to water supply, the quality of this service is very low. Water shortages, low pressure and intermittent supply of a few hours a day are widespread. Poor institutional arrangements: Currently, there is a varied mix of institutional responsibilities with regard to planning, implementation, and maintenance of water supply and sanitation facilities. In general, the States have a predominant position and through departments or specialized agencies ("Water Boards") they finance, plan, and execute most of the investments; meanwhile, the municipal bodies are in charge of maintaining the systems. This split in responsibilities discourages financial discipline, gives low priority to operation and maintenance, and diffuses accountability. Lack of autonomy and weak utility management capacity: the technical and financial performance of the water utilities is poor. Management and operating efficiency is constrained most critically by a very limited degree of autonomy on personnel and financial issues and poor accountability. Deficient cost recovery policy: Water tariffs are generally insufficient to recover the full cost of supply. Tariff structures are complex, overburden industrial consumption, and do not provide incentives for efficient use of water. Environmental degradation: Increasing the present low coverage (489) of sanitation services in urban areas, especially acute in small-and medium-size  towns, is a huge environmental and financial challenge. In most cases, sewage generated is not treated. Inefficient inter-sectoral water allocation due to inadequate water pricing system and lack of comprehensive water resources management policy and plans. The Government of India (GOI) and Government of Tamil Nadu (GOTN) are aware of these critical issues, and recognize the need to address them. This project supports GOTN's strategy to enhance the performance of the water sector. A recent Government order has granted increased powers to MetroWater in personnel and financial matters. Solid waste management sector issues in India Inadequate collection efficiency rate and quality of service: Collection efficiency of about 50- is common in small-size cities. In larger cities, collection rates are higher (up to 90%) but generally waste is collected from communal masonry dustbins or roadside drains which pose a significant health hazard for the community. Also waste often finds its way into the sewers and down the drains causing blockages and polluting the water sources. Poor management of transfer stations within the city is also widespread. Unsafe handling of waste: Usually, there is no specialized collection and disposal of hazardous waste. Disposal is unsanitary with open dumping. Inadequate cost recovery: In most cases, direct charges do not exist. Solid waste collection, transfer and disposal are financed out of the overall local government budget, and maintenance and investment is deficient. CMC's strategy to address the above-mentioned issues in Chennai includes an investment program and institutional reforms. The reform measures are based on the following principles: increasing awareness about this service among the population; piloting new approaches to the collection system; and introducing private sector participation. 2. Objectives The project aims to improve living, environmental, and health conditions of the population of Chennai (formerly Madras), estimated to be about 4.5 million people, on a sustainable basis and at reduced subsidy costs. It supports the investment and reform programs of GOTN, MetroWater, and CMC to address the above issues in the water supply, sanitation and solid waste services in Chennai. 3. Description The main project components are: Component 1 - Rehabilitation and upgrading of water supply system: Investments include: rehabilitation of Kilpauk treatment plant and pumping stations; upgrading of the remaining 8 water distribution networks ; and completion of the Unaccounted for Water Monitoring and Reduction (UFW) program initiated under the Second Project. Component 2 - Rehabilitation and upgrading of the sewerage collection and sewage treatment systems: Investments include: new sewage pumping stations; upgrading of sewerage collection system; and first phase upgrading of 4 existing sewage treatment plants. Component 3 - Low-Cost Sanitation. It includes: twin-pit pour flush latrines (tentatively 20,000) where sewers are not feasible; -2-  latrines and sewer connections (tentatively 15,000) in sewered areas; and collection of sullage from about 2,000 houses in narrow streets for conveyance to the nearest sewer. Component 4 - Resettlement and rehabilitation of persons affected by the WS&S components Component 5 - Techn'l assistance and training. It will include: support for UFW Program; twinning arrangement with a water utility; technical designs for further investments, etc.; and assistance in project implementation. Component 6 - Solid waste management. Investments will include: equipment for collection, haulage, and disposal of solid waste; rehabilitation of transfer stations; and upgrading of dumping sites. Technical Assistance will include: detailed technical designs of transfer stations; TOR for private sector participation in the haulage and management of the landfill sites; and other TA & studies (to improve accounting & financial management, etc.). 4. Financing (approximate estimate in million USD equivalent) - IBRD: 195 - GOTN: 48 - MetroWater: 45 - CMC: 12 Total Project Cost: 300 Of which Foreign: 75 Local: 225 5. Implementation Implementation period: 5 years (1999-2004). Implementation Arrangements: MetroWater will be responsible for implementing all project components, except for the component related to the solid waste management which will be implemented by CMC. Water supply and sewerage investments (components 1, 2, 4 and 5). The unit responsible for the Second Project will be strengthened to follow up execution of the Third Project. In order to reduce the risk of delayed implementation and ensure the highest quality of construction, this unit will be assisted by a qualified Project Management consulting firm for planning and supervision of works. Furthermore, MetroWater has agreed to extensively use large contracts under international competitive bidding procedures which will also have a positive bearing on project management. Given the importance of the unaccounted for water (UFW) reduction program, a specialized unit may be created to launch implementation of the internalization program and train other staff. Low-cost sanitation program (component 3). The program will be demand-based and implemented with full community participation. NGOs will be drafted to work with the community to elicit informed community participation and facilitate sustainability of the program. Demand will be expressed by willing households through upfront contributions of a part of the cost. MetroWater will be the implementing agency and will organize technical supervision and -3 -  quality control of the latrines constructed by the NGOs through a full-time Field Management Unit. Solid waste management component. Day-to-day supervision of implementation of solid waste management component will be the responsibility of a team headed by the Superintending Engineer Solid Waste, under the Deputy Commissioner Health & Conservancy who reports to the Commissioner of CMC. 6. Sustainability [Note: Flag the factors critical for the sustainability of project benefits.]The sustainability of the water supply and sewerage components of the project will depend critically on how successful MetroWater will develop, or allowed to be developed, into a sound commercially-oriented utility. This implies that MetroWater will need to have sufficient autonomy to conduct its business efficiently including the ability to raise tariffs for full cost recovery. These are the key issues being addressed under the project. The sustainability of the low-cost sanitation program will depend largely on the degree of ownership of the users who are among the poorest sections of the population. This will be achieved by a demand-driven approach, beneficiaries' capital cost contribution and by involving stakeholders throughout the preparation, design and implementation of this component. The sustainability of the solid waste management component will depend on CMC's operating and financial capacity. A review of CMC's financial projections indicates adequate financial capacity to implement the proposed investments, maintain the new assets, and service the loan. The financial prospects of CMC are likely to improve as the 74th Constitutional Amendment provisions are implemented. Also, private sector participation in the haulage and disposal of solid wastes should enhance the efficiency and long-term sustainability of solid wastes services. 7. Lessons learned from past operations in the country/sector Water supply and sanitation projects. A review of the project implementation reports indicates that in most cases the physical objectives of past operations were attained, although with considerable delays and occasionally major cost overruns. The proposed project intends to prevent most common causes of delays by having final designs, land acquisition, environmental and other clearances, and procurement documents finalized for a significant proportion of the works by appraisal. The objective of achieving institutional, financial or economic improvements has been somewhat more elusive. Although some achievements have been attained by the Bank supported projects, overall the improvements in operational efficiency, financial viability, organizational and management capacity of the water supply and sanitation providers did not achieve the stated targets. Reasons for the limited achievements are the predisposition for construction as opposed to rehabilitation and strengthening operational performance, political opposition to tariff increases, inadequate planning and preparation of plans to achieve the targets, inadequate consultation with users, deficient policy framework, and lack of adequate commitment on the part of the Borrower to introduce policy reform and institutional improvements. This project will further develop MetroWater into a sound utility including a plan to provide consumers with 24 hours uninterrupted water service, completing implementation of a comprehensive unaccounted for water program, and improving the metering, - 4 -  billing and collection systems. 8. Poverty Category Although this is not a poverty targeted intervention, it will benefit the poor in Chennai which suffer the most from the current water scarcity and deficient sanitation coverage. The low-cost sanitation program in particular, should benefit the poorest section of the population in the city and upgrade their living standards. 9. Environmental Aspects The project interventions will be made in the urban areas of city of Chennai (formerly Madras) with a population of around 4.5 million; the city has serious environmental problems due to lack of adequate water supply, poor sanitation and inefficient solid waste management. The storm drains and small rivers in the city carry high organic pollution. Some of the wastewater effluent would be discharged to already polluted watercourses, all of which run into the Bay of Bengal. The two existing landfill sites are near former natural wetland areas, and there is considerable pollution of the natural environment. It is beyond the scope of this project to address many of these problems (i.e. storm drainage, ponding of polluted water, and contamination of drains), however the project should have considerable positive environmental impacts: rehabilitation and upgrading of the sewerage collection system will prevent recurrent wastewater overflows and reduce the volume of wastewater disposed of without any treatment. The low-cost sanitation program will provide safe excreta and sullage disposal in the slums and low income settlements of Chennai and surrounding urban areas. The solid waste management component will increase awareness and promote more environmentally sound practices. Since this project has major environmental impacts, it is classified as Category A. Substantive additional water supply to the city's residents will increase wastewater flows. Upgrading and expansion of the sewage treatment plants will generate increased effluent flows. Remediation of two large existing landfill sites intends to reduce the negative impacts on ambient soil, air and water, including groundwater resources, that have been going on for years. Still, full protection might be too costly and some negative impacts may thus persist. A new landfill site will also have some negative impacts on the surroundings. In both cases, if properly designed and mitigated, the negative impacts of the landfill sites can be minimized. MetroWater has carried out a socio-economic survey to determine the additional assistance required for persons affected by the Krishna Canal and related works (which will become the main source of drinking water to Chennai) who are still living below the poverty line. Based on this survey, MetroWater, assisted by consultants, is preparing a remedial action plan (Retrofit Resettlement and Rehabilitation Action Plan) to improve their living standards. 10. Program Objective Categories {Program Objective Categories} Pumping stations for the 16 distribution zones envisaged under the Master Plan and upgrading of 8 distribution networks are being financed by Housing Development Corporation (HUDCO) and the Second Madras Water Supply Project (Loan 3907-IN). 11. Contact Point: The InfoShop The World Bank - 5 -  1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending September 11, 1998. - 6 -